In this context, the strong growth in net inflows through this route assumes significance. Amfi data also shows that on an average, the mutual fund industry had added about 9.7 lakh SIP accounts each month during the FY18 as against an average addition of 6.27 lakh SIP accounts per month in FY16.
In March, 2018 when benchmark equity indices shed 3.5% in value and inflows into equity mutual funds, in aggregate, dipped to a 13 month low, one type of investment bucked the trend, SIPs or systematic investment plans. Data from Association of Mutual Funds in India (Amfi) shows that SIPs drew in Rs 7,119 crore in the last month of financial year 2017-18, 64% higher than in the same month a year ago and 10.8% more than the inflows in February. In the just concluded fiscal, total resource mobilisation through SIPs was Rs 67,190 crore against Rs 43,921 crore in previous fiscal, spelling a heady growth of 53%. Net inflows into the equity schemes (equity and equity linked saving schemes) last fiscal stood at Rs 1.71 lakh crore against Rs 70,367 crore in the previous fiscal, a growth of 143%. This gush of money followed a year of strong returns—benchmark indices gained 16.9% in FY17— followed by another year of gains, at 11.3% for the benchmarks. However, will some of this money is ‘hot’ in nature—meaning it can come in and go out at short notice, SIPs provide the steady, recurring inflows into schemes.
In this context, the strong growth in net inflows through this route assumes significance. Amfi data also shows that on an average, the mutual fund industry had added about 9.7 lakh SIP accounts each month during the FY18 as against an average addition of 6.27 lakh SIP accounts per month in FY16. A Balasubramanian CEO at Aditya Birla Sun Life AMC said, “SIP as an asset class is now accepted as a mode of investment in mutual funds. SIPs also takes care of market volatility in the form of rupee cost averaging. So, despite volatility people want to continue with their SIPs and even new investors want to enter mutual funds through SIPs. Due to these reasons we have seen continued growth in inflows through SIPs every month.” He also added that, people have understood the way of investing in mutual funds. SIPs will continue to see strong growth even this financial year. An SIP allows an investor to invest a fixed sum regularly in a mutual fund scheme, typically an equity mutual fund scheme and helps investors to average their purchase cost to maximise returns. SIPs have been gaining popularity among domestic mutual fund investors, as it allows them to invest in a disciplined manner without worrying about market volatility.
Rahul Parikh CEO at Bajaj Capital said, “There are lot of first time investors who are coming through SIP route and they go by their experience. I don’t see volatility of two months shaking their faith in SIPs. But if markets remain unstable for say six-nine months, then one could see possible impact on SIP flows. Having said that, there is immense opportunity to grow as mutual funds are still under penetrated and they will continue to grow going forward”.